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The UK's telecoms industry has begun to give its first reaction to Ofcom's new deal with BT and appears to welcome the regulator's moves to create a virtual split within the monster telco.

However, while they applaud Ofcom they maintain it must remain vigilant to ensure that BT abides by the new regulatory regime.

Operators argued that this inherent conflict of interest was damaging the industry and consumers.

Ofcom stopped short of launching an Enterprise Act investigation that could have led to the break up of BT as provider of both wholesale and retail services.

Instead, it took a "halfway house" approach securing an operational separation within the former UK monopoly that should, if it works, provide equal access to BT's network.

A spokesman for AOL UK said: "AOL UK's view is that if the detail matches the headlines then this review should open up BT's network to much greater competition. Ofcom should be commended if it can deliver the certainty ISPs and telecoms providers need to invest in the UK telecoms network.

"It is vital, if consumers are to see genuine benefits from this paper agreement, that Ofcom remains vigilant and engaged with the Local Loop Unbundling process on an ongoing basis, and that it also ensures that BT is required to deliver genuinely equal access to both its current network and to the 21CN network initiative.

"In short, Ofcom gets an 'A' for the written paper, let's hope that doesn't slip to a 'C' as a result of a bad practical.

Energis - which has been highly critical of BT's dominance and one of the few operators that believes full structural separation is still needed - also gave its tentative thumbs-up to today's announcement.

"We're optimistic that Ofcom has achieved a settlement that resolves important issues about the structure and incentives of BT and the associated impact on the market," it said in a statement.

"We made clear our support for full structural separation as the only real solution to bring to an end BT's fundamental conflict of interest between its dual roles of competitor and supplier. However if Ofcom's solution addresses the problems it originally identified, we will work hard with both BT and Ofcom to ensure that it is implemented effectively.

"In particular we'll be looking for evidence that Ofcom has the necessary powers of enforcement in the event that BT does not comply with any undertakings."

That point is echoed by Richard Sweet, head of Regulation at Scottish telco Thus. He supports Ofcom's decision not to make an Enterprise Act reference that could lead to the break-up of BT which "would have caused further uncertainty and disruption".

But he added: "However, Ofcom must be prepared to take firm and swift action if BT fails to deliver on its undertakings. The most pressing issue facing industry today is next generation networks, and how to ensure that BT's 21st century network supports full and fair competition." ®